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Pacira Pharmaceuticals, Inc. (PCRX - Analyst Report) recently announced the pricing of its private offering of 3.25% convertible senior notes due Feb 1, 2019 worth $110 million. The offering is expected to close on Jan 23, 2013. Initial buyers will have a 30-day option of buying additional notes worth $10 million.

The senior unsecured notes can be converted into cash up to the principal amount and the remaining conversion value can be converted into cash and/or equity shares, as considered fit by the company.

Pacira said that the initial conversion rate for the notes will be 40.2945 shares of common stock per $1,000 principal amount. This is equivalent to an initial conversion price of about $24.82 per share and represents a 32.5% premium to the closing price of the stock on Jan 16, 2013.  The notes will accrue interest payable semiannually in arrears.

Pacira laid out its plans for the utilization of $105.7 million of net funds that will be raised. About $30 million of the net proceeds will be used for the repayment of all outstanding debt under its senior secured credit facility. At the end of the third quarter of 2012, Pacira had outstanding long-term debt of $24.9 million. On May 10, 2012, Oxford Finance had provided Pacira with a $27.5 million senior secured term loan.

The balance of the net proceeds from the offering will be used for the commercialization of Exparel, additional development of Exparel and general corporate purposes. Exparel is indicated for administration into the surgical site to produce postsurgical analgesia.

Exparel gained US Food and Drug Administration (FDA) approval in Oct 2011 and was launched in Apr 2012. In the third quarter of 2012, Exparel revenues were $4.6 million, accounting for 54.1% of total revenues. Pacira is trying to expand Exparel’s label for additional indications like ileostomy reversal, open and laparoscopic colectomy procedures, as well as a wide range of plastic surgery usage and TAP (Transverse Abdominis Plane) infiltration.

We currently have a Neutral recommendation on Pacira. The stock carries a Zacks Rank #3 (Hold). Right now, Valeant Pharmaceuticals International, Inc. ((VRX - Analyst Report)) looks more attractive with a Zacks Rank #1 (Strong Buy).

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